Saturday 24 February 2018

Aircraft write-down rules 'a big boost for Irish leasing firms'

Irish-based lessors manage more than €100bn in aircraft assets
Irish-based lessors manage more than €100bn in aircraft assets
Donal O'Donovan

Donal O'Donovan

IRISH aviation leasing companies are able to write down the value of their assets over just a fraction of their useful economic life - a significant boon to the industry - according to figures from the Central Bank.

There are 1,132 Irish-resident aircraft-leasing companies in Ireland although researchers said that detailed information was only available for 848. The sector has been bolstered by tax rules that allow owners to depreciate their assets just a fraction of the way through their productive life, according to new research conducted by staff at the Central Bank.

The study looked at the development of Ireland as one of just two major hubs for the global aircraft leasing industry, alongside the US.

As part of their research, they used a newly created internal database on aircraft leasing. It shows that, including limited companies and special purpose vehicles, more than 1,100 entities registered here are linked to aircraft leasing.

Estimates put the number of people employed by the sector at between 1,000 and 2,000 - concentrated in Dublin and in and around Shannon, Co Clare.

The scale of the industry - with assets estimated at somewhere between €83bn and €113bn - has been blamed for distorting attempts to measure the size of the economy.

That's mainly because planes bought by Irish leasing companies are counted along with other investment in official data, even if the aircraft themselves never touch down in Ireland.

The growth of the aircraft leasing sector here began with the late Tony Ryan's GPA in the 1970s.

Today, factors that make Ireland attractive include the skilled work force that has developed here in tandem with the growth of the sector.

Ireland's comprehensive double tax treaty network with approximately 70 countries - which makes it easier to conduct cross-border business without hitting tax barriers is another factor.

The authors cited Ireland's tax regime - both the headline 12.5pc corporate tax rate that applies to all sectors, but also depreciation rules that allow aircraft owners to write down the value of aircraft over just eight years. The depreciation treatment allows owners to use the decline in the value of assets to reduce their annual tax bills.

According to the Central Bank report however, which cites industry analysis, the useful life of a commercial jet aircraft is closer to 25 years, on average. Half of all planes remain in service even beyond that, it said.

"The useful economic life , then, tends to be considerably longer than the depreciation period allowable for tax purposes," they said.

Even with an apparently generous regime, the sector is now a significant contributor to State coffers, the report shows.

The authors cite research commissioned by the Federation of Aerospace Enterprises in Ireland.

The industry body found that the sector contributed €270m in corporation tax in 2007.

More recent studies also cited in the research put the tax take from the sector at closer to €310m - vast sums relative to the tiny numbers employed.

Assessing the true value of the sector remains challenging, the authors say.

They point to the lack of hard data on the number of people employed by aircraft leasing firms or details on the purchases by the companies of services within the Irish economy.

Irish Independent

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